20220125Final_Order_No_35303.pdf

ORDER NO. 35303 1

Office of the Secretary
Service Date
January 25, 2022
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

On March 3, 2021, Rocky Mountain Power, a division of PacifiCorp (“Company”)
requested the Commission approve or reject a replacement Power Purchase Agreement (the
“PPA”) with Commercial Energy Management, Inc. (“Seller”) for the purchase of energy and
capacity.
On March 25, 2021, the Commission set deadlines for interested persons to comment
on the Application, and for the Company to reply. See Order No. 34975. On April 27, 2021, the
Seller filed comments. The Commission Staff (“Staff”) filed comments on April 28, 2021. The
Company filed reply comments on May 12, 2021.
APPLICATION
The Company asserted that the Seller owns and operates a 900 kilowatt (“kW”)
hydroelectric qualifying facility (“QF”) under the Public Utility Regulatory Policies Act of 1978
(“PURPA”). Application at 1. The QF is on the Portneuf River east of Lava Hot Springs in
Bannock County, Idaho. Id. at 1-2. The Seller and the Company’s previous contract for the sale
of energy from the QF was dated November 12, 1991. Id. at 2. The Company asserts this contract
was entered into prior to the Company’s separation of its energy supply and transmission functions
as required by FERC and included provisions that addressed both energy sales and interconnection
requirements. Id. at 3. In June 2020, the Commission approved an extension to this contract that
extended its term through March 1, 2021, or upon the replacement date of the new PPA, whichever
was sooner. Id. citing Order No. 34792, PAC-E-20-09.
COMMENTS
1. Seller’s Comments
Despite executing the proposed PPA, Seller, through counsel, asked the Commission
to reject it because of the process the Company used to obtain Seller’s execution of the PPA and
IN THE MATTER OF ROCKY MOUNTAIN
POWER’S APPLICATION FOR APPROVAL
OR REJECTION OF THE POWER
PURCHASE AGREEMENT WITH
COMMERCIAL ENERGY MANAGEMENT,
INC.
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CASE NO. PAC-E-21-05

ORDER NO. 35303

ORDER NO. 35303 2

the inclusion of the 90/110 “concept” in the PPA. Seller Comments at 1. Seller claimed that since
August 2019 it tried to negotiate the PPA with the Company. Id. Seller asserted the Company
would not engage with it “for weeks and months at a time.” Id. Seller claimed this has the potential
to cost the Seller because the Commission’s June 1, 2019, published rates (which are much higher
than those subsequently published by the Commission and incorporated into the Agreement)
would have applied to the PPA had the Company timely engaged in discussions with the Seller.
Id. at 2. The Seller speculated that the Company was trying to avoid higher costs by delaying the
finalization of the proposed PPA. Id. Seller also asserted that the interconnection issues were not
timely raised by the Company. Id.
Seller asserted that it also had numerous objections to terms of the PPA, but those were
ignored by the Company. Id. The Seller felt it had no choice to sign the PPA on February 26,
2021, just three days before the extension ended. Id.
Seller also asserted that the 90/110 provisions of the PPA were forced on it. Id. Seller
asserted that the prior 1991 contract with the Company did not include this concept. Id.
Seller argued that the Company has used its “size and market dominance” to force
Seller to agree to the terms in the proposed PPA. Id. at 3. Seller requested that the Commission
reject the PPA and “send the parties back for true negotiations that can arrive at a power production
agreement that is fair to both the Company and Seller.” Id.
1. Staff Comments
Staff’s review of the PPA focused on the 90/110 rule; long-range, day-ahead, and real-
time forecasting; eligibility for capacity payments; avoided cost rates; and a lapsed contract period.
Staff Comments at 2.
Staff confirmed the PPA contains the 90/110 provisions required by Commission Order
29632. Staff also believed that for the purpose of the 90/110 Rule, only the monthly estimates in
Section 4.9 of the PPA are used, instead of any of the annual estimates. Id. However, Staff was
concerned about the definition of the Expected Net Output in the PPA which provides:
“Expected Net Output” means 2300 MWh (depends on run-of-river flow) of
Net Output in the first Contract Year, as applicable, by an annual degradation
factor of 1% (depends on run-of-river flow) per Contract Year, measured at
the Point of Delivery. Seller estimates that the Net Output will be delivered
during each Contract Year, measured at the Point of Delivery. Seller
estimates that the Net Output will be delivered during each Contract Year

ORDER NO. 35303 3

according to the Expected Monthly Net Output provided in Exhibit A-1, as
reduced each Contract Year, as applicable, by the annual degradation factor.

Id. at 3. Contrary to this definition, in response to Staff’s Production Request No. 4, the Company
stated that the Expected Net Output definition is the initial forecast of generation, meant to inform
expectations of generation at the time of contracting, and this forecast is not updated after
contracting. Id. Staff believed that if the definition of Expected Net Output is necessary in the
PPA, it should be modified to reflect that the forecast is not updated after contracting and should
use the correct amount of 2,310 megawatt-hours (“MWh”) per year.
Staff noted the PPA uses a 10-day advanced notice to revise future monthly estimates.
Id. Staff stated that if the Company develops a web-based or other electronic noticing or
scheduling system for the Seller to provide estimates, the timeframe will be revised to a 5-day
advanced notice. Id. Staff believed any timeframe between a month in advance and 5 days in
advance is reasonable. Id.
In addition to the 10-day advanced notice, the PPA requires that beginning the end of
the ninth full calendar month after the “Effective Date”, and at the end of every third month
thereafter, Seller shall supplement the Energy Delivery Schedule with three additional months of
forward estimates, such that the Energy Delivery Schedule will provide at least three months of
scheduled energy estimates. See Section 4.9.2. of the PPA. Staff believed the statement should
be changed to “at least six-months of scheduled energy estimates at all times” to resolve the
inconsistency. Id. at 3-4. For example, at the end of the ninth full month after the Effective Date,
the Seller may provide three additional months of estimates for January, February, and March of
the following year. Id. at 4. This effectively provides six months of estimates, including October,
November, and December of the first year and January, February, and March of the second year.
Staff recommends this inconsistency be corrected in the PPA. Id.
Staff asserted that the Company uses the Palo Verde Hub to establish market prices for
the purpose of the 90/110 Rule. Id. Staff believed the Company’s determination of market prices
is fair and reasonable.
In the PPA Staff noted the Seller agreed to provide an annual update to the 12X24
generation profile in Section 6.7.1. Id. Although the Commission does not require 12X24
generation profiles for contracts that use published rates, Staff did not oppose this provision agreed
upon by the parties. Id. The Seller also agrees to pay for the day-ahead and real-time forecasting

ORDER NO. 35303 4

services in Section 5.7.2. Although the Commission does not require day-ahead and real-time
forecasting services, Staff did not oppose this provision agreed upon by the parties. Id.
Staff stated that the Seller was paid for capacity at the end of the original contract, and
during the original contract term, the Company has added significant resources to meet its capacity
deficiencies. Id. Therefore, Staff is confident that the Facility has contributed to meeting the
Company’s need for capacity during the term of the original 1991 contract and should receive full
capacity payments in the proposed PPA. Id. at 5.
Staff also reviewed the non-seasonal hydro avoided cost rates contained in the PPA and
verified that the rates are correct. Id.
Last, the original contract expired on March 1, 2021, and the initial delivery date in the
PPA is on the same date. Id. However, the proposed effective date of the PPA would be after any
Commission approval of the PPA. See Section 2.1 of the PPA. Therefore, Staff asserted there is
a lapsed contract period between March 1, 2021, and the effective date (the “Lapse Period”). Staff
noted that in Case No. AVU-E-19-16, the Commission approved both energy and capacity
payments during a Lapse Period for the owner of the QF in that case. Staff verified with the
Company that the Facility in this case has continued to be operational; thus, Staff recommended
energy and capacity payments during the Lapse Period using published rates in the PPA.
Staff recommended the parties file an amended PPA that includes the following
updates:
1. The definition of Expected Net Output should be modified to reflect that the
forecast is not updated after contracting and should use the correct amount of 2,310 MWh/year.
2. The inconsistency of “three months” in Section 4.9.2. of the PPA should be
corrected to six months. Staff recommended approval of an amended PPA with these updates and
also recommended that, if the updates described above are made by the Company, the Commission
declare that the avoided cost prices set forth in the PPA are just and reasonable, in the public
interest, and that the Company’s incurrence of such costs are legitimate expenses.
2. Company Reply Comments
In its Reply Comments, the Company represented it is willing to make the
modifications to the PPA as recommended by Staff in its Comments. Company Reply Comments
at 2.

ORDER NO. 35303 5

The Company also disagreed with the Seller’s objection to the 90/110 provision in the
PPA asserting that this provision has been approved by the Commission in previous cases and is
consistent with law and past practice, as detailed in Staff Comments. Id. Further, the Company
asserted that there is no evidence that the Company engaged in any gamesmanship to delay the
execution of the Agreement. Id. The Company first requested a Voluntary Consent from the Seller
to determine transmission interconnection progress of the facility in September 2019. Id. The
Company asserted it provided Seller with a draft PPA before the expiration of the original contract
between the parties. Id. At the request of the Seller, the Company stated it extended the original
PPA so that Seller would have time to resolve necessary interconnection issues. Id. at 3. The
Company represented the extension was signed on March 20, 2020. Id. Four days after the
extension was signed, the Company executed the small generator interconnection agreement
(“SGIA”), which resolved the interconnection issues. Id. After the SGIA was signed, the
Company asserted that nothing prevented Seller from working with the Company to finalize the
February 3, 2020, PPA. After a period of silence, the Company claimed to have made a concerted
effort to reengage the Seller in negotiations in November 2020 by providing the Seller with a draft
PPA. Id. Contrary to Seller’s assertions, the Company asserted it made every effort to negotiate
the PPA in a timely fashion. Id. Throughout its comments, Seller makes allegations that the
Company delayed negotiations for its own “advantage,” but provides no proof of Company-caused
delay or Company benefit from the delay. Id.
The Company asserted that the cost of PPAs are passed directly to customers, there is
no benefit to the Company for delaying the negotiation of a PPA. Id. For these reasons, and with
Staff’s proposed modifications to the PPA noted above, the Company respectfully requests that
the Commission approve or reject the PPA as requested in the Company’s Application, subject to
the execution of an amendment consistent with Staff’s Comments.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-
503. The Commission is empowered to investigate rates, charges, rules, regulations, practices,
and contracts of public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provision of law, and to fix the same by order. Idaho Code
§§ 61-502 and 61-503. The Commission also has authority under PURPA and FERC regulations
to set avoided cost rates, to order electric utilities to enter fixed-term obligations for the purchase

ORDER NO. 35303 6

of energy from QFs, and to implement FERC rules. The Commission may enter any final order
consistent with its authority under Title 61 and PURPA.
The Commission has reviewed the record, including the Application, the PPA, and the
comments of Staff, the Seller and the Company. Based on our review, we find it reasonable to
approve the PPA conditionally on the Company and Seller entering and filing an amended PPA
containing the modifications discussed below. With regard to the remainder of the content of the
PPA, because it contains Commission-approved terms that the Facility is eligible for based on its
characteristics such as fuel source, project size, and renewal contract status. Additionally, the
Facility has helped meet the Company’s need for additional capacity.
The Commission also finds it appropriate for the Company to pay the Seller for
capacity and energy deliveries during the Lapse Period—the time between the prior power
purchase agreement’s March 1, 2021, expiration and the day before the service date of this Order—
at the published avoided cost rates using published rates in the PPA. This treatment is consistent
with prior Commission decisions. However, at some point after a contract expires, the lack of
further contractual commitment could create uncertainty for the Company’s resource planning.
Moreover, payment of capacity relies on continuous operation under a valid power purchase
agreement. See Order 33357 at 25-26.
The Commission conditions its approval of the Application on the Company filing an
amended PPA, executed by the Company and Seller that includes: 1) modifying the definition of
Expected Net Output to reflect that the forecast is not updated after contracting and should use the
correct amount of 2,310 MWh/year; and 2) the inconsistency of “three months” in Section 4.9.2.
of the PPA should be corrected to “six months”.
The Commission also finds it just and reasonable to include capacity payments for the
duration of the PPA. Last, the Commission finds the Company’s payments for purchases of energy
and capacity under the PPA are prudently incurred expenses for ratemaking purposes.
O R D E R
IT IS HEREBY ORDERED that the Company’s PPA is approved conditioned upon
the Company and Seller executing and submitting an amended PPA to the Commission that
contains: 1) modification to the definition of Expected Net Output to reflect that the forecast is not
updated after contracting and should use the correct amount of 2,310 MWh/year; and 2) correcting
the inconsistency of “three months” in Section 4.9.2. of the PPA to state “six months”.

ORDER NO. 35303 7

IT IS FURTHER ORDERED that the Company’s payments for energy and capacity
under the renewal PPA and the Lapse Period shall be allowed as prudently incurred expenses for
ratemaking purposes.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order regarding any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.
DONE by order of the Idaho Public Utilities Commission at Boise, Idaho this 25th day
of January 2022.

ERIC ANDERSON, PRESIDENT

JOHN CHATBURN, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

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